The US government sold off its remaining shares in Citigroup Inc on Monday for US$4.35 each, marking an exit from ownership in the bailed-out banking giant with a US$12 billion gross profit for taxpayers.
The US Treasury said it will take in US$10.5 billion in sale proceeds from a public offering of 2.4 billion Citigroup shares, announced just hours earlier. The price is US$0.10 below the US$4.45 closing price on the New York Stock Exchange.
“By selling all the remaining Citigroup shares today, we had an opportunity to lock in substantial profits for the taxpayer and avoid future risk,” said Tim Massad, US Treasury acting assistant secretary for financial stability.
“With this transaction, we have advanced our goals of recovering TARP [Troubled Asset Relief Program] funds, protecting the taxpayer and getting the government out of the business of owning stakes in private companies,” Massad added in a statement.
The Treasury invested a total of US$45 billion to bail out Citigroup in 2008 and last year, during the financial crisis. The company paid back US$20 billion in preferred stock, while another US$25 billion was converted to 7.7 billion common shares held by the Treasury.
It had whittled that stake down over the past year from 27 percent to less than 7 percent through controlled sales in the market.
The move to sell the remaining shares in one large offering follows last month’s successful initial public offering in General Motors Corp, which significantly reduced the government’s stake.
The General Motors offering attracted strong interest from domestic institutional investors and foreign sovereign wealth funds alike.
“Citi is pleased that the US Department of the Treasury has finalized plans to exit from its remaining holdings of Citigroup common stock. We are very appreciative of the support provided by the Treasury during the financial crisis,” Citigroup spokesman Jon Diat said in a statement.
The offering, run by Morgan Stanley as book-running manager, is expected to close on or about Friday. Underwriting fees for the transaction will be paid by Citigroup, the Treasury said.
However, the sale does not completely free Citigroup from the government’s clutches. The Treasury also said it would continue to hold warrants to purchase Citigroup shares issued as part of the bailout. These may be repurchased by Citigroup or sold in a separate auction for an additional profit.
The Treasury also said it is entitled to receive about US$800 million in Citigroup Trust Preferred Securities from the US Federal Deposit Insurance Corp (FDIC) under a debt guarantee program — provided that the FDIC incurs no losses on Citigroup debt it backstopped during the financial crisis.